India’s fintech partygoers nurse a needed hangover

PB Fintech

11/09/2023 02:39

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Shritama Bose
       MUMBAI, Sept 11 (Reuters Breakingviews) - India’s
financial technology industry is suffering from overindulgence.
And it was on full display at a sombre Global Fintech Festival
in Mumbai last week. Founders touted sustainable growth amid
dipping valuations, regulators preached risk mitigation and big
investors stayed away. This waning euphoria for the country’s
digital ecosystem may, though, be an early sign of maturity.
    There are plenty of reasons for feeling gloomy. The South
Asian country is the world’s third-largest fintech market by
number of unicorns. Its $16 billion annual revenue, though,
accounts for only 5% of the sector’s global turnover, per Boston
Consulting Group. Venture capital and private equity investments
into the sector more than halved to less than $4 billion during
the 12 months to the end of March from the previous period, data
from the Reserve Bank Innovation Hub show.
    Valuations are getting reset across India’s startup
landscape. Poster child Byju’s is squabbling with lenders as
investors walk away and financial reports get delayed. Listed
payments firm One97 Communications  PAYT.NS , financial
marketplace PB Fintech  PBFI.NS  and beauty retailer Nykaa’s
owner FSN E-Commerce Ventures  FSNE.NS  are all trading below
the price of their November 2021 initial public offerings. 
    The gloom seeped into conversations at the industry’s annual
shindig. One panel had digital lenders deliberating on ways to
lower lending costs, with securitisation and co-lending offered
up as solutions. On another, venture debt investor Innoven
Triple Blue Capital Advisors’ Tarana Lalwani hesitatingly
wondered how many lenders can keep chasing the same customers
and hinted at the possibility of consolidation.
    Disaffection with a core feature of India’s much-vaunted
public digital infrastructure was palpable. Vishwas Patel,
director at payment solutions provider Infibeam Avenues
 IFIB.NS , characterised New Delhi’s zero-fee policy for fast
payments as a roadblock to future growth. That, and banks’
alleged unwillingness to share with fintechs a government
subsidy for fees forgone, were partly responsible, he argued,
for India having so few so-called decacorns, or players worth at
least $10 billion. In fact, the country has just one in fintech,
PhonePe  PHOP.NS . 
    Apart from Accel, Peak XV Partners - formerly Sequoia
Capital’s India and Southeast Asia unit - and a few
fintech-focused names like Ribbit Capital, bulge-bracket
investors were missing from a speaker lineup that boasted
central bankers from Rwanda to Japan and Germany to Peru. Those
who did attend admitted they’re taking longer to sign term
sheets than in 2021 and spoke of a growing demand for debt
funding.
    The thrust of regulators’ speeches was on consumer
protection and managing risks like cyber fraud. Even the chief
of the watchdog for India’s fledgling offshore financial centre
stressed the need for supervision while inviting fintechs to set
up shop there.
    The impending launch of Mukesh Ambani’s $19 billion Jio
Financial Services  JIOF.NS  loomed over the event, which used
the tycoon’s Jio World Convention Centre as its venue. A
deep-pocketed new challenger is hardly what Indian fintechs need
right now. But it’s one of several factors that could help shape
a more realistic outlook for their future.
    
    Follow @ShritamaBose on X
   

    CONTEXT NEWS
    The Global Fintech Fest organised by the National Payments
Corporation of India and industry association Payments Council
of India was held between Sept. 5 and 7 in Mumbai. The event
hosted 800 speakers, 50,000 delegates and over 500 exhibitors
from 125 countries.

 (Editing by Antony Currie, Katrina Hamlin and Thomas Shum)
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